September 22, 2011

Higher Taxes Is Not the Answer to the Jobs Crisis

In a speech this week, the President called on Congress to pass his “American Jobs Act” right away. He also released his plan to pay for it -- $1.5 trillion in jobs-killing tax hikes. He said the plan is not class warfare, but simply “math.” Any plan that chooses winners and losers by calling for massive tax increases aimed at America’s entrepreneurs and job creators will further hamper job growth and only exacerbate the already dire unemployment situation.

The President is pursuing the same failed policies that have resulted in a double digit unemployment rate in North Carolina and many other parts of the country. Those policies have not worked over the past 3 years and they will not work now.

Calls for higher taxes and more government regulation will continue to erode the confidence business owners need to grow the economy and hire more workers. America’s job creators need to know they will not be burdened with excessive regulation and new taxes.

The President attempted to justify his plan by saying the rich must pay their “fair” share. The President cited a story Warren Buffett tells about his secretary paying a lower tax rate than he does. Rather than relying on a flawed anecdote that compares different types of taxes, the President should be sharing some of the figures (simple math) that show just how much of their “fair share” the “rich” are paying.

Fact Checking Simple Math

“Recently released IRS data for 2009, shows that taxpayers earning over $200,000 paid 50 percent of the $866 billion in total income taxes paid that year, or $434 billion. Skeptics will say, 'That's because they earn the majority of the income in America.' Not so. These taxpayers earned 25 percent of the $7.6 trillion in total adjusted gross income in the country that year.”

“The 2009 IRS data also shows that a record 58.6 million tax filers had no income tax liability that year. This means that 42 percent of the 140 million Americans who filed tax returns that year contributed nothing to the basic cost of government.”

“In 2008, the roughly 1,900 largest corporations paid $152 billion in income taxes. This amounted to 67 percent of the $227 billion in total corporate income taxes paid that year.”

Earlier this year, Veronique de Rugy and Jason J. Fichtner charted the "fairness" of the biggest source of federal revenues – the federal income tax, with this bar graph using IRS information.

The chart above shows just how much of their “fair share” the business owners in America are paying.

WASHINGTON (AP) — President Barack Obama says he wants to make sure millionaires are taxed at higher rates than their secretaries. The data say they already are.

"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said as he announced his deficit-reduction plan this week. "It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."

On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent of federal income taxes, according to the Congressional Budget Office.

The President's complaint, echoing billionaire Warren Buffett, is that too many billionaires pay a lower rate than regular salary earners. So even as he endorsed tax reform in general yesterday, Mr. Obama insisted that one of his reform "principles" is that people who make more than $1 million must pay a higher tax rate than middle-class earners.

There's one small problem: The entire Buffett Rule premise is false, as the nearby table shows. In 2008, the last year for which such data are available, the IRS reports that those who made more than $1 million in adjusted gross income paid an average income tax rate of 23.3%.

That's slightly lower than the 24.1% rate paid by those making between $500,000 and $1 million, probably because the richest are like Mr. Buffett and earn more from capital gains and dividends. The rate for a relative handful of the rich—400 people—fell to 18%, the modern equivalent of Barr's Gang of 21. But nearly all millionaires still paid a rate that is more than twice the 8.9% average rate paid by those earning between $50,000 and $100,000, and more than three times the 7.2% average rate paid by those earning less than $50,000. The larger point is that the claim that CEOs are routinely paying lower tax rates than their secretaries is Omaha hokum.

Squeezing America’s job creators is not the way to grow jobs

President Obama is now calling on the Joint Select Committee on Deficit Reduction, which is tasked with reducing the deficit by $1.5 trillion, to raise taxes by $1.5 trillion. The plan would raise taxes on both small businesses and on private capital, both of which are essential for job creation.

The President says we need a balanced approach to the jobs and debt crisis, but when the President talks about balance, he talks about taxing those already paying the majority of taxes even more. We don’t need more taxes to achieve balance -- we need a Balanced Budget Amendment to control spending.

A new round of taxing, spending and regulating will not improve America's economy and jobs situation. House Republicans' plan for fundamental tax reform, cutting spending and reducing excessive regulation will create an environment for economic growth, and it is my hope that the President will join us in these efforts.